Tuesday, January 11, 2011

Whenever someone commits a particularly shocking crime with firearms—especially a horrific mass murder—there are calls for gun control. The reasoning seems to be that a law prohibiting the ownership or carrying of certain weapons will prevent or reduce the number of such atrocities. Although most other laws targeting ownership of contraband—such as drug laws—do not really work in keeping the barred items out of determined people’s hands; and although people bent on committing mass murder do not tend to be the more law-abiding members of society; we are supposed to believe that the way to stop violent crimes is simply to make it illegal to be armed.

On the other hand, government commits violence against the innocent on a daily basis. In foreign lands, hundreds of thousands have died in the last decade, in a killing spree unleashed by the U.S. government in response to 9/11. On the local level, police frequently brutalize the accused and taze, beat and shoot innocent people. The TSA has become an agency of routine sexual molestation. In detention centers at home and abroad, the criminal justice system has become an accessory to mass rape and gang violence. The feds commit torture.

Yet rarely do people suggest that gun control is the answer to these atrocities. And of course, what would that even entail? Disarming the police? That would be part of it, yet even that would not suffice, for so long as there is political power at all, we can say that Mao was right that it flows from the barrel of a gun. Government is institutionalized violence.

The state will necessarily abuse the coercive tools we allow it to have. The overwhelming majority of private individuals, however, will use guns responsibly, and in many cases defensively. Violent private criminals can never be stopped with gun control, which only empowers the state and predators, both private and governmental, while disarming the victims. Despite all these truths, a truly terrible crime as the one that occurred in Arizona is used to bolster the case for tipping the scales of power further toward those who do not feel bound by the law. This, also despite the fact that the government did not fulfill one of its purported functions here in preempting or rapidly stopping a massacre. Trillions of dollars of government. Millions of prisoners. Thousands not returning from war. But safety as the government promises it is an illusion, and its inevitable failures to secure total safety will always be twisted into reasons for giving it more power.

What matter most are culture and a respect for innocent life. And the killer in Tuscon had no respect for innocent life—this, more this his alleged hatred of government, is the clear value that we can assume from his behavior. This is more important than his reported fondness for Ayn Rand, Mein Kampf, or the Communist Manifesto; his obsession with literacy or the fact that people can legally carry guns in Arizona. They cannot legally commit murder, after all, and that law didn’t stop him.

But the state does not promote a respect for life. Yet after an atrocity like this, few suggest that it be limited, controlled or disarmed.

GATA today scored a small but perhaps auspicious victory over the Federal Reserve in our lawsuit seeking access to the Fed's secret gold files. The judge presiding over GATA's federal freedom-of-information lawsuit in U.S. District Court for the District of Columbia, Ellen Segal Huvelle, granted GATA's motion to order the Fed to produce in complete form for the judge's private review 20 gold-related documents the Fed has sought to keep secret. The judge ordered the Fed to deliver the documents by Friday.

Through its lawyers, William J. Olson P.C. of Vienna, Virginia -- www.LawAndFreedom.com -- GATA has argued that the Fed's production of gold-related documents has been so inadequate and the Fed's arguments for keeping them secret so weak that the court should review the documents acknowledged by the Fed and order the Fed to answer 25 questions from GATA about the Fed's search for relevant information.

While Judge Huvelle still could grant at any time the Fed's motion to dismiss GATA's lawsuit, her ruling today at least implies a little skepticism about the Fed and its tactics. Combined with today's statement by U.S. Rep. Ron Paul, the new chairman of the House Financial Services Committee's Subcommittee on Monetary Policy (http://www.gata.org/node/9495), Judge Huvelle's ruling gives hope that the Fed's enormous secret power to rig markets and bestow the most fantastic patronage on a parasitic financial elite can be brought to account eventually.

The judge's order to the Fed to produce documents for her private review can be found at GATA's Internet site here:

Those who are skeptical of GATA's complaint that the Federal Reserve is part of an international gold-price rigging scheme should reflect on the meaning of the Fed's refusal to disclose all its gold-related records, records that include gold swap arrangements with foreign banks:

If the U.S. gold reserves are just sitting somewhere, inert, unencumbered, and unused for surreptitious market intervention, what's the problem with full disclosure?

Financial journalists unafraid of aggravating the world's financial powers should start putting gold-related questions to the Fed and other central banks and stop simply assuming that secrecy should be the normal order of things with central banks and gold.

And people everywhere who believe in free markets in the monetary metals and who have not already supported GATA financially can join our struggle here:

This struggle could have been undertaken easily and likely more effectively by the World Gold Council, which aims to represent gold mining companies and gold investors. But the council's indifference to questions of surreptitious central bank intervention in the gold market has left the struggle to GATA. We need your help to pursue this struggle to victory for free markets, limited government, and a better, fairer world.

The U.S. government is insolvent. Who says so? Timothy F. Geithner, the U.S. Secretary of the Treasury.

Geithner sent a letter to Congress on Jan. 6, 2011 asking for the debt limit to be raised. If it is not raised, he warned, the U.S. will default on its debt. In his words:

Never in our history has Congress failed to increase the debt limit when necessary. Failure to raise the limit would precipitate a default by the United States."

He didn’t say that the government will be inconvenienced. He didn’t say that the government would be forced to muddle through by delaying payments, raising taxes, and cutting non-obligatory programs and services. He said the government will default. This means that the government doesn’t have enough cash to pay its obligations to the many and sundry persons to whom it owes cash unless Congress authorizes an issue of even more debt.

After the government issues the new debt, its overall debt will be even higher than before. Unless its obligations that require cash payments are reduced, or unless it finds new sources of revenue, or unless the interest rates that it pays decline, the same situation will surely occur again and occur even faster because its overall debt will have risen. It will run short of cash to pay its obligations.

Suppose that you had a debt of $10,000 that required a payment of $500 in order to stave off your creditors’ seizing your assets. Suppose that you didn’t have the $500. One way out would be to borrow $500 from a new lender and use that $500 to pay off the old lenders. That buys you time. However, now you have debts of $10,500. You have to find ways of lowering this or else you will again be faced with an even worse situation.

You are approaching insolvency when you begin to run out of new lenders who are willing to add to your debt. The willing lenders dry up because they know that they have to get in line to get their promised payments while you continually seek out new borrowers, all the while making your situation worse and worse.

Knowing their precarious position, the new lenders are likely to demand rising default risk premiums.

Insolvency occurs when you cannot find enough cash from any source, even new lenders, in order to make required payments.

The U.S. is approaching insolvency, according to its Treasury Secretary. He didn’t put the matter in precisely that way, but he put it in words that are as close as you can get to it. He said that the U.S. would default, and its only way out at this moment is to issue more debt.

The increases in the debt limit have necessarily accompanied the increase in the government’s overall debt. Those increases have been especially astonishing in the last 10 years. The ceiling is now $14.29 trillion. The ceiling was $5.73 trillion in September of 2001. That’s a growth rate of over 10 percent a year.

A few months back, Laurence Kotlikoff wrote that "The U.S. is bankrupt." Using the government’s numbers properly labeled, he found that the U.S. fiscal gap, which is the difference between the present value of projected spending and revenues, is $202 trillion. An IMF study of the U.S. finances found that it would have to double taxes to close its fiscal gap. This is an impossibility. It would destroy the struggling economy.

Geithner’s statement confirms those of other analysts outside of the U.S. government.

According to Kotlikoff, the government’s sixty-year "massive Ponzi scheme" will end when there are not enough revenues to pay for Social Security, Medicare, and Medicaid. He sees large benefit cuts, large tax increases, and high inflation ahead when the government seeks to survive.

How will the U.S. extricate itself from this situation? That’s a matter of speculation because there are many interacting variables involved. There are lots of ifs, ands, and buts.

When a state cannot meet its promised obligations, there is no bankruptcy code to guide a reorganization, as there is with a company. There is no court to oversee a restructuring. There is no judge or panel that decides on the priority of claims. Instead, the government itself decides how to handle its inability to pay cash to fulfill its promises.

In the immediate future, the U.S. government will not default on its bonds. They will have priority of payment. The reason the government will do that is to maintain its capacity to borrow at reasonable rates of interest so that it can maintain its size and programs. If the government defaulted on its bonds as a way of solving its financial problem, it would have immediately to cut back its spending severely. The government would shrink radically all at once. The government would take a big bath. Congress doesn’t want to do that. It would rather stretch out the default process and inflict the pain over time and among more groups than bondholders. Congressmen prefer to maintain themselves in power while managing a large government. Other branches and bureaucracies also prefer to keep their pet programs and activities afloat.

Therefore, as usual, Congress will raise the debt limit again. That doesn’t end the financial problem. It adds to it even as it postpones and enhances possible insolvency.

The new lenders that the government seeks out to lend it new cash are likely to demand higher interest rates, except for one major lender, which is the Federal Reserve System.

Bond yields are subject to numerous worldwide influences. They include the default risk premiums demanded by foreign lenders, including Asian central banks. Those risk premiums are likely to rise.

In contrast, the Federal Reserve has committed itself to buying $600 billion of new government debt in the next few months. Its purchases tend to support bond prices and keep interest rates down, other things equal.

As the Federal Reserve keeps buying more and more government debt, with no prospect of reducing its holdings unless and until the government gets its house in order, bond yields are likely to rise, despite Fed buying, because yields also reflect inflation premiums. The prospect of inflation will rise as the Fed monetizes the debt. We would then see yields rising accompanied by firm prices of commodities and metals.

The inflationary participation by the Fed, which postpones the inevitable fiscal decisions of the government, harms all holders of fixed-dollar assets and all those whose receipts of dollars are fixed and lag behind the Fed’s production of new dollars. In addition and more importantly, the inflation sets in motion another boom-bust cycle.

Continued debt monetization by the Fed is quite likely for many reasons. One is that the Fed can act even when Congress is deadlocked. Another is the apparent necessity, in the Fed’s view, to avoid the failure of government debt issues. A third is that the Fed rationalizes what it’s doing by economic slack and low headline CPI inflation. Fourth, the banking system is still insolvent and the Fed wishes to raise asset prices. Fifth, the Fed doesn’t connect its debt monetization to higher yields. When it starts to make that connection, either directly or because headline CPI inflation rises, then it may be more likely to alter its current policy.

If the U.S. does not decrease the fiscal gap, rising yields will rapidly force it into taking action because rising yields raise the likelihood of insolvency and raise the likelihood of its occurring sooner rather than later.

The effects of the Fed’s inflation on stocks vary by individual company. They depend on the net monetary positions of the companies, the nature and location of its operations, its hedging, and other factors. There is no simple prognosis for the whole stock market.

Since yields are likely to rise as lenders demand higher default risk premiums and as they demand higher inflation premiums (when the Fed monetizes debt), with the Fed’s ability to keep rates down only a temporary and/or only a restraining phenomenon, and since these yield increases hasten the prospect of insolvency, the government can only avoid default by either slowing down its borrowing (and spending) or by raising revenues. Doing nothing means it will default.

If government borrowing slows down, its spending will have to slow down. Many Americans will find this very unpleasant as benefits, now and prospective, are cut, and as various other programs are cut. If government raises taxes, the impact of its gargantuan borrowing will come home to Americans, again in a most unpleasant way. Their disposable incomes will fall sharply.

Outright default on U.S. bonds is not in the cards because that immobilizes the entire U.S. government. The government won’t do that. It will look after itself and its own survival first. The American public comes last. Default upon promises made to Americans is the more likely course of action.

Thus, the government will slow budget increases, or stop them altogether, or cut its spending in absolute terms. Like any borrower, its borrowing capacity is not unlimited. Its borrowing capacity depends on its taxing power which, in turn, depends on the productivity of those whom it taxes. Causation runs in both directions. The productivity also depends on the tax and regulatory structures. It’s inconceivable that the government could double taxes. If it did, most of the economy would attempt to go underground. Whatever remained above ground would have vastly reduced incentives to produce.

Which groups and programs will be the object of government cutbacks? That is again a matter of speculation. It depends on which groups have the firmest control over the government’s purse, which groups make the largest protests, and which groups have the greatest influence on votes for key Congressmen and campaign contributions. I agree with Kotlikoff and Gary North that the most likely targets are the largest ones, and they are the social welfare programs.

Some groups are going to experience the brunt of the actions taken to avoid default. Others are likely to go relatively unscathed. Government bureaucrats will try to protect themselves. This is going to create domestic conflict, protests, and dissension. Life is going to be much harder for Americans in the future, unless increased productivity from some unknown sources of invention or technology offsets the impact of government promises that are going to be defaulted upon.

Congress has another option, which is to seize the assets of Americans. This is a form of taxation. Congress can force pension funds to take its bond issues. This would force down the prices of corporate stocks and bonds. It would devastate the economy. A large-scale program of bond cram-downs is almost tantamount to making the Fed absorb bonds. It puts pressure on the Fed to create more money so as to keep asset prices up. Such a program would be an act of desperation by the government that simply beggared the population. It would certainly not resolve the insolvency.

When, if ever, will Congress start to act in size, that is, with cutbacks large enough to avoid defaulting on its bonds? My answer is this: Not yet.

The prospect of rising yields is not yet felt in the minds of those in government. The prospect of a budget out of control due to a huge and rising bond interest payment obligation hasn’t yet hit home among government officials. They can’t see the tidal wave. They don’t believe it’s coming. The Fed’s purchase program is obscuring their vision. The slow economy is helping to hold down bond yields for the moment. The foreign central banks, as a group, are still supporting the U.S. bond market. People who are afraid of going back into stocks are still supporting the U.S. debt market.

Furthermore, the two parties are both enamored of big government. Nearly all politicians are sensitive to public demands for free lunches. That is one reason why the fiscal gap is so huge in the first place. America did not exactly fall all over itself in trying to stop a prescription drug benefit. Consequently, the government is postponing actions to close the fiscal gap.

One fine day, there will be a discontinuity. There will be a many-sigma event. There will be a fiscal earthquake or a market earthquake or some combination of both. This will not be a pleasant experience for Americans, but those in government have little reason to fear it. They can label it a crisis, as if we do not already have a crisis. They can use such a "crisis" as the excuse for more radical government action. The government can demand even more power or simply exercise it, even if the results are to make matters worse for Americans.

For governments, crises are opportunities, a fact well known among analysts of government. This fact is one reason why governments postpone taking actions to remedy what appear to the rest of us to be bad situations.

Unfortunately, the fact that governments batten on crises and see them as opportunities is not well known among the general population which still looks to government to handle crises.

Since the insolvency of the U.S. is a fact and a fact that implies hard times ahead for anyone who depends on government, it is prudent to take measures to make oneself as independent of government as one possibly can.

This video powerfully presents the ideas in this essay. My first spiritual teacher, who also doubled as a martial arts instructor, taught that people learn from repetition and impact. The video definitely delivers on the impact and I hope my presentation of the words of many delivers on the necessary repetition. It is understandable when people without resources and intelligence ignore all the warning signs but there is no excuse when intellectually capable people stick their collective heads in the sand.

Egon von Greyerz writes, “We now live in a world where governments print worthless pieces of paper to buy other worthless pieces of paper that, combined with worthless derivatives, finance assets whose values are totally dependent on all these worthless debt instruments. Thus most of these assets are also worthless. So the world financial system is a house of cards where each instrument’s false value is artificially supported by another instrument’s false value. The fuse of the world financial market time bomb has been lit. There is no longer a question of IF it will happen but only WHEN and HOW. The world lives in blissful ignorance of this.”

Ben Bernanke, Timothy Geithner, Barack Obama, the WallStreet banks, and the corporate mainstream media are playing a giantconfidence game. It is a desperate gamble. The plan has been toconvince the population of the US that the economy is in full recovery mode.-The Burning Platform-

“First, the global economy is in dire straits and riding the wave of a convoluted ‘recovery’ built on fiat and fantasy. So to get to the point (as if it is not painfully obvious); there is no recovery! I don’t care how often CNBC, MSNBC, FOX, or CNN, pull skewed data and automaton analysts from their ghastly dungeon of disinformation, the fundamental dysfunctions of the American economy remain unchanged. The key here is the dollar and its inevitable demise, which the establishment is trying desperately to hide until the last possible moment. Over the next year we are likely to be buried in a deluge of excuses, half-truths, and lies, all meant to divert attention away from the word ‘inflation’ as the masses begin to question just what the hell is going on,” writes Giordano Bruno.The mainstream financial press as usual will be used as a tool to mislead the public even as the storm hits them broadside.

The United States financial system, as it exists, is makingwar on its own citizens, and on the citizens of other countries,by foisting the decrepit system on the rest of the world.-James West-

After the Federal Reserve went on its latest rampage of printing money, Peter Schiff of Euro Pacific Capital said, “If bond prices failed to rise given such a Herculean effort to lift them up, there can be only one direction for them to go: down.” So as the winter opened her cold doors, the bells of doom are ringing in the huge bond market meaning that a lot of trouble is brewing on the horizon. “The big money realizes that the Fed is fueling a trend of global inflation.And only a fool would want to be stuck holding bonds when interest rates rise,” writes Robert Prechter.

One can hear a storm like this approaching. It sounds like a hundred freight trains converging on you. The above video is like this but reality is always so much worse than any presentation of it. Storms like this are real and they do destroy property and kill people. What is happening in the financial sphere though is so much worse for its going to be like a storm of this destructive power touching down on all points of the earth simultaneously. Everyone everywhere will feel its destructive capacity to destroy lives and wealth though obviously the wealthy that have their wits about them have prepared more than others.

James Howard Kunstler, in a master document of the world’s fate for 2011 says, “As is the case now, first in the unraveling of global financial arrangements – a terrifying matrix of irresolvable mutual obligations that are destined to be repudiated in an ugly way. Everybody owes too much money to everybody else. A worldwide game of financial musical chairs is currently eliminating various nation-players too weak to plant their asses in the diminishing chair-space. Iceland dropped out first, then Greece, then Ireland, and so it goes. Entering 2011, the trouble is that the world is out of runt countries to shove to the sidelines. There are Portugal and Belgium to go, and from these on all you’ve got are nations too big to fail and too broke to keep going, the most conspicuous being Spain.”

It is uncommon to conceptualize the world and human history as an ongoing clash between the filthy rich and almost everyone else, between the extractors of economic renters and the sellers of debt, the oppressors and the oppressed. Today we stand on the brink where large swaths of unproductive private and public debt will not be repaid, and sovereign countries will default on their obligations. International monetary, political or strategic unions that rely on economic stability, mutual trust and confidence will not be preserved in any meaningful form and it’s going to be one hell of a ride down from here.

Governments will do anything to keep funds flowing.

Daniel R. Amerman writes, “Something really interesting (and terrifying) happens when you combine monetary inflation with asset deflation in real terms (meaning the purchasing power of assets is plummeting). As the dollar price of the assets in ever-more-worthless dollars climbs higher and higher, the purchasing power of those assets drops lower and lower. This generates very high taxable profits that are then taken by an increasingly desperate federal government.”

Amerman continues, “Many people, looking at what has just been presented, would see this as being a major reason to keep that deficit spending right up there and maybe even get more aggressive about it. This is indeed the position of many politicians and pundits, as well as a number of mainstream economists. Unfortunately, there is a double problem with this approach: there’s no indication that it’s working other than as a short term band-aid, and the cost of the “band-aid” risks wiping out the value of money, savings and investment on a nationwide basis.”

“Unfortunately it appears quite likely that there will be a crash in the value of money itself. This is likely to be accompanied by a crash in the purchasing power of financial assets. The stock market may collapse in a way we haven’t seen since the last time we saw this level of depression, that being the 1930s. We are likely to see a tremendous bond market crash as US government monetary creation and manipulation is eventually overwhelmed by reality.”

The Western public debt crisis is growing very rapidly. The absence of economic recovery in the United States, the accelerated structural weakening of the United States in monetary, financial as well as diplomatic affairs, and the global drying up of sources of cheap finance are all leading to a storm of unprecedented proportions. Ron Robins writes, “Banks and the financial system will probably soon experience a new round of massive real-estate-related losses and subsequent financial institutions’ bankruptcies. Thus, a new major financial crisis will likely soon engulf America, greatly impairing its lending facilities and creating a severe scarcity of debt.”

The biggest macro-economic story of 2010 was Europe:It’s falling apart, and there doesn’t seemto be anything that’s going to stop this collapse.

Jim Willie writes, “Remember in mid-2008 the nation was told that the $1.4 trillion deficit would be reduced to below $1 trillion easily in 2009. It was not, and repeated the $1.4 trillion. Remember in mid-2009 the nation was told that the previous two $1.4 trillion deficits would be reduced to below $1 trillion easily in 2010. It was not, and repeated the $1.4 trillion. Finally, the US Govt deficits in current projections are estimated to be well above $1 trillion, as reality has struck. The $1T deficits are a permanent fixture. Thus the Quantitative Easing #2 is in place, since the US Treasury does not want the shame from failed auctions to reflect badly on the US Dollar or the other galaxy of US$-based paper assets. They masquerade as containing value, when they are largely trash items. They can no longer compete against gold. If truth be known, Wall Street executives are trashing their corporations and buying gold in private accounts as counter-parties. They will someday dump their corporate losses on the US Govt and ride into the sunset zillionaires. Then comes the US Treasury default.”

Practical Economics

Enough of this high finance stuff. Let’s look at how the common man is fairing in all of this. Public Workers Facing Outrage as Budget Crises Grow reads the headline in the New York Times. “Across the nation, a rising irritation with public employee unions is palpable, as a wounded economy has blown gaping holes in state, city, and town budgets, and revealed that some public pension funds dangle perilously close to bankruptcy.”

Everyone either on a pension or soon to deserve one might not get one or will definitely lose ground as the money to pay them dries up. It will almost be like class warfare with people close to or in retirement being the first in line to lose the basic structure of their lives. Equally, the salt of society, its teachers, librarians, police, firemen, and just about everyone else in local, city, and state governments are facing an apocalypse in terms of their promised benefits and even their daily wages.

The young also are not having a good time with things these days either. Europe’s Young Grow Agitated Over Future Prospects is the headline, also published in the Times. Many of the young are getting fed up with how surreal and ultimately sad it is to be young in the first world today. The outrage of the young has erupted, sometimes violently, on the streets of Greece and Italy in recent weeks, as the young protest austerity measures and a rising reality and feeling of being increasingly shut out of their own futures. The young are facing a terrible job market.

“Giuliano Amato, an economist and former Italian prime minister, was even more blunt. “By now, only a few people refuse to understand that youth protests aren’t a protest against the university reform, but against a general situation in which the older generations have eaten the future of the younger ones,” he recently told Corriere della Sera, Italy’s largest newspaper.”

“As a result, a deep malaise has set in among young people. Some take to the streets in protest; others emigrate to Northern Europe or beyond in an epic brain drain of college graduate. But many more suffer in silence, living in their childhood bedrooms well into adulthood because they cannot afford to move out.”

Conclusion: “Sooner or later all this dishonesty will terminate in collapsing living standards, loss of public services, growing civil disorder, and political crisis. You can get there via deflation (no money) or via inflation (plenty of worthless money) but the destination is the same.I don’t see how America fails to begin arriving at that destination before Halloween 2011. Europe may get there by springtime, anyway, dragging the rest of the developed world into a vortex,” writes James Howard Kunstler.

WASHINGTON (MarketWatch) — Responding to a growing wave of foreclosures, the Federal Deposit Insurance Corp. is considering whether to impose new disclosure requirements on big banks seeking to package and sell mortgage securities to investors.

Specifically, the FDIC is considering whether big banks that own both servicers and second-lien loans should need to disclose to mortgage investors, before loans are packaged and sold, what would happen to the second-lien loan if the first mortgage comes into distress, according to people familiar with the agency.

These second loans were taken out in large numbers during the housing boom that led to the financial crisis. Many homeowners took out second liens to fund home-improvements or expensive purchases.

In many cases big bank holders of second lien loans haven’t disclosed what their arrangement is on those loans with the corresponding owner of the primary mortgage.

Mortgage investors, Democratic lawmakers and academics argue that the lack of transparency is a key reason why big, bank-owned mortgage servicers have been opposed to modifying many mortgages for troubled homeowners even when loan bondholders want to lower interest payments for borrowers.

They argue that internal conflicts at big banks are blocking critical loan modifications that they believe are necessary to revive the economy and limit the expected 8 to 13 million foreclosures expected by 2012.

The vast majority of U.S. second-lien loans, a huge part of the $11 trillion mortgage industry, are owned by large financial institutions. The largest banks hold roughly $500 billion in second-lien loans. They also own the largest servicers, which collect a fee for administrating all aspects of a loan, including sending monthly payments to mortgage investors, maintaining records and collecting and paying taxes and insurance.

The top four U.S. mortgage servicers are owned by Bank of America, Wells Fargo, J.P. Morgan Chase, and Citigroup according to Inside Mortgage Finance. These four companies are also top securitizers of mortgage loans. None returned requests for comment.

Regulatory observers warn that there is a major conflict of interest inherent in this arrangement. They contend servicers are reticent to modify primary mortgages owned by bondholders, even if those mortgage investors want to alter the loan to help troubled borrowers, because they are under pressure from their parent bank not to modify the second mortgages the large institution owns.

“The servicer won’t modify the second-lien loan because of what it means for their parent bank’s balance sheet, and the mortgage investors of the primary loan, in return, won’t want to modify the primary mortgage if the second lien is not being modified,” says Henry Sommer, director at the National Association of Consumer Bankruptcy Attorneys. “However, the servicer is supposed to act in the best interest of all parties, not just the second-lien loan its parent bank owns.”

The Too Big To Fail banks have been waiting with trepidation for a ruling from the Supreme Judicial Court of the State of Massachusetts on the case titledUS Bank National Association (as trustee) vs. Antonio Ibanez. They were right to be fearful. The state supreme court has ruled against the banks and upheld a lower court order that nullified foreclosures by US Bancorp and Wells Fargo, on the grounds that neither bank had the legal right under Massachusetts law to foreclose. Today’s ruling has far-reaching consequences for the banks and the housing market in general, as it throws into serious question the legal soundness of millions of mortgages in the US if, as expected, courts in other states come to similar conclusions as the Supreme Judicial Court of Massachusetts.

The Ibanez case tied together two separate but similar foreclosure actions in Massachusetts, the second case being that of Wells Fargo vs. Mark and Tammy LaRace. Both foreclosures took place on the same day, the banks having previously published their intention to foreclose in a local newspaper as required by law. The banks then purchased the properties at prices described by the court as significantly below market value. About a year after the foreclosures (in autumn of 2008) the banks then applied to the local Land Court for a ruling that in each foreclosure, the bank had full legal right to foreclose as mortgagee, that the bank title to the property was “unclouded” by any other contesting right, and that the bank therefore owned the property in what is legally known as “fee simple” status. These claims were contested by the property owners who had lost their homes in the foreclosure, and the Land Court agreed with the homeowners that the foreclosures had been invalid. Critical to the decision of the Land Court was the fact that both banks admitted that they did not receive assignment of the mortgage to the property until after the foreclosure.

The State Supreme Judicial Court Upholds the Ruling of the Lower Court

The Supreme Judicial Court found that the Land Court made no errors in its judgment for the defendants. Citing the Ibanez case as an example, the justices noted that Antonio Ibanez executed a mortgage in 2005 with Rose Mortgage Inc., which allegedly assigned this mortgage (which gives the proper holder the legal right to foreclose) to Option One Mortgage Co. They in turn assigned it to Lehman Bros. Lehman Bros. supposedly assigned the mortgage to Lehman Bros. Holdings Inc., which packaged it with about 1,000 other mortgages to be sold as a security. These mortgages were supposed to be placed with Structured Asset Securities Corp, set up explicitly for the purpose of protecting the bondholders who bought the securities. This company was supposed to assign the mortgages to US Bancorp N.A., as trustee. In the event there was need to foreclose on any of the properties, it was the job of US Bancorp to do so, on behalf of the trust and the interest of the bondholders. This is why US Bancorp entered into a foreclosure action against Antonio Ibanez, who clearly had defaulted on his mortgage, and it is why US Bancorp became a plaintiff in front of the Land Court and the Supreme Judicial Court of Massachusetts.

This chain of assignments is important to the case, because all it took for the banks to win was to show up in court with the proper legal documents evidencing the mortgage assignment. They didn’t even have to show up with the original mortgage or the note from the borrower – they just had to have documentation for each link in the chain of assignments. Not only did they not have this, the best they could show was an assignment after the date of the foreclosure, meaning the banks never had assigned the mortgage properly in the first place. This was the basis under which the Land Court ruled against the banks, and which was convincing proof for the state supreme court justices that the foreclosures were never legal.

Carelessness Is a Polite Term for Criminal Recklessness by the Banks

One of the justices who concurred in this decision, Justice Cordry, wrote:

[W]hat is surprising about these cases is … the utter carelessness with which the plaintiff banks documented the titles to their assets.

Carelessness is a polite word. The banks have acted with criminal recklessness. In these and similar cases that have cropped up around the country, it is becoming obvious that the big banks involved in securitizing mortgages during the past 15 years purposefully evaded local legal requirements for registering mortgages and accompanying borrower notes with a county recorder of deeds. The banks sold mortgages to other banks without bothering to transfer to the buyer a proper document of assignment evidencing the sale. Mortgages were bundled up into trusts for the purpose of securitizing them to investors, but the trusts were also never given proper legal evidence of the assignment of the mortgages. Then, when the housing market blew up and banks were forced into pursuing millions of foreclosures, they created the assignments after the fact, used “robo-signers” to submit legal documents to the courts (in one such case the signer had been dead for over five years), falsified notarizations, and in other similar ways perpetrated fraud upon the courts. This is on top of the thousands of documented cases where foreclosures were conducted even though the borrower was not notified in advance, or the borrower was specifically told by the bank to withhold payments in order to qualify for a mortgage modification but then declared in default by the bank, or the bank added thousands of dollars of “late fees” to the borrower’s account, forcing them into default.

Today’s ruling by the Massachusetts supreme court is just one more step in this long judicial argument over foreclosures, but it is consistent with a string of similar rulings from common law courts and bankruptcy judges against the banks. It remains to be seen whether today’s ruling will be appealed by the banks to the US Supreme Court, but this may be highly risky. Real estate law is almost always viewed by the federal courts as the province of state legislatures and courts, so it is hard to overturn a state supreme court on such a matter. Moreover, the banks’ case is exceptionally weak. Banks have been unable in courts anywhere in the US to show up with basic documentation, including a stream of assignments properly executed, that shows they are the holder of the mortgage with a right to foreclosure.

The right of the banks to foreclose on residential property is now being contested in every state. People who have lost their homes in foreclosure are now suing for compensation for their loss, on the grounds the foreclosure was fraudulent. Even more serious than this, investors who bought “mortgage backed securities” are beginning to file claims of fraud against the banks, arguing that these securities were never properly collateralized in the first place. These investors want 100% of their money back, which would lead to claims of trillions of dollars against the big banks.

There are therefore two areas of jeopardy for the big banks. First, investors who bought securities that were supposedly collateralized by mortgages can claim they were victims of fraud, and demand their money back. This means that the big banks will become direct mortgagee not only for the properties in their portfolio now, but for millions more that they must buy back. This could constitute much more than half of all homes/mortgages in the US, of which over 3% are now already in default.

The second problem is that the mortgages in many of these cases may now be deemed legally invalid. This doesn’t mean the homeowner can live for free forever in their home if they default; it just means that the banks have to pursue the defaulting homeowner as it would someone who defaults on an unsecured credit card loan. Credit card defaults are usually absorbed 100% by the banks since there is no collateral to posses and sell. Credit cards therefore carry interest rates as high as 30% p.a., compared to mortgage rates of around 5%, even though the term of a mortgage is much longer. If mortgages were unsecured, they would be priced much closer to 30% p.a. to ensure that the banks made enough money on their mortgage portfolios after taking 100% of the loss on defaults. This would make homeownership virtually unaffordable for any American.

Are You Incredulous Yet?

What is beginning to unfold before our eyes is a situation which can only be comprehended with jaw-dropping incredulity. For at least ten years the large US banks have been selling a product – the residential home mortgage – with a fatal legal flaw that renders it uncollateralized. The product should have been priced like any other unsecured consumer loan – at rates at least triple the actual mortgage rate in the US. There are something like $6 trillion of mortgages extant in the US, among over 55 million borrowers. Most of these mortgages have been grossly underpriced, and at existing default rates, there is simply not enough equity capital in the banking system – and not enough profit being generated by mortgage portfolios - to absorb current losses. Even if you assume the banks don’t have to take a full 100% loss on a home default, and that some portion of the home sale after bankruptcy will eventually trickle down to the bank as a general creditor, the Too Big To Fail banks are doomed to insolvency.

Dragged into this situation automatically is the federal government. The US Treasury owns Fannie Mae and Freddie Mac, which are already insolvent and must turn to the government for capital infusions every quarter just to cover the losses on their existing home mortgage portfolios. These institutions are now facing much higher loss rates on their own portfolios of trillions of dollars of home mortgages. You may throw into this picture also the Federal Reserve System, which chose to buy over one trillion dollars of mortgage backed securities from the banks in 2008 and 2009, and which is itself technically insolvent if this portfolio turns out to be uncollateralized, as is becoming increasingly likely.

With increasing desperation, banks along with their enablers in Washington are going to try to jerry-rig a way out of this problem. Unfortunately for the banks, ex post facto laws are strictly forbidden by the Constitution, which is now being treated with new-found reverence by the Congress. It may be impossible to construct a law that solves problems like this that already exist. Perhaps the banks will get lucky, and some courts will begin to find in their favor, though that is certainly not the trend at the moment. Maybe the US Supreme Court will accept the banks’ argument that the securitization process in itself established a valid foreclosure claim even though mortgages were not properly assigned as required by state laws. This, however, would require the Supreme Court to make up a legal doctrine out of the blue (as the banks have done), thereby overturning all state laws and court rulings going back well over 100 years. Only a Supreme Court bought and paid for by bank lobbyists, and willing to prostitute itself publicly to its paymasters, would issue such a ruling.

This means that the likely progression of events – the path we are now on - will lead to a near complete collapse of the housing market, because the big banks and the two government enterprises responsible for supporting the housing market will be fatally crippled wards of the state. The US government itself, including the Federal Reserve, will be equally crippled. Try as you might, you will find no words in the Bible – no phrases applicable to The Flood or to the destruction of whole cities at the hands of a vengeful God – that appropriately capture the financial gravity of this situation. But if we are forced to come up with some metaphor, Financial Armageddon will have to do.

To hear a number of prominent economists tell it, it doesn't look good for the U.S. economy, not this year, not in 10 years.

Leading thinkers in the dismal science speaking at an annual convention offered varying visions of U.S. economic decline, in the short, medium and long term. This year, the recovery may bog down as government stimulus measures dry up.

In the long run, the United States must face up to inevitably being overtaken by China as the world's largest economy. And it may have missed a chance to rein in its largest financial institutions, many of whom remain too big to fail and are getting bigger.

On the one hand, Harvard's Martin Feldstein said he believes the outlook for U.S. economic growth in 2011 is less sanguine than many believe.

First, the boost to growth from government spending will be drying up this year, he said. Renewal of expiring tax cuts is no more than a decision not to raise taxes, and the impact of one-year payroll tax cut is likely modest, he said.

"There's really not much help coming from fiscal policy in the year ahead," he said. Woes from the dire situations of state and local governments may actually be a drag on growth, he said.

Growth got a lift from a lower saving rate in 2010, but that probably will not last this year as households worried about an uncertain future return to paring back debt and socking more away, Feldstein added. Discouraging declines in home values mean there is less to save from, he said.

"People are worried, so there's a strong reason for precautionary saving," he said.

The race is on

On the other hand, there is the race with China and the dynamic Asian economies, including India. Most estimates put the size of the Chinese economy on par with the United States by the early 2020s, said Dale Jorgenson, also of Harvard.

Jorgenson sees Asian emerging markets as the most dynamic in the world, eclipsing other emerging market contenders such as Brazil and Russia with steady growth over the next decade.

"The rise of developing Asia is going to accompany slower world economic growth," he said.

The United States will need to come to terms with the fact that its prevalence in the world is fated to come to an end, Jorgenson said. This will be difficult for many Americans to swallow and the United States should brace for social unrest amid blame over who was responsible for squandering global primacy, he said.

MIT's Simon Johnson put it more bluntly, saying the damage from the financial crisis and its aftermath have dealt U.S. prominence a permanent blow.

"The age of American predominance is over," he told a panel. "The (Chinese) Yuan will be the world's reserve currency within two decades."

Johnson said he believes the United States has failed to learn its lesson from the financial crisis and continues to implicitly back its largest financial institutions.

"I'm concerned about the excessive power of the largest global banks," he said. "Who are the government-sponsored enterprises now? It's the six biggest bank holding companies."

To be sure, Raghuram Rajan, a former IMF chief economist now with the University of Chicago's Booth School of Business, could still envision an ongoing U.S. leadership role.

Nothing proceeds in a straight line, he said, and there are many pitfalls along the way even for dynamic Asian economies.

"I would say the age of American dominance may be nearing an end. But America as the biggest mover will be in place for a long time," he said.

If you hang out much with thinking people, conversation eventually turns to the serious political and cultural questions of our times. Such as: How can the Americans remain so consistently brain-fucked? Much of the world, including plenty of Americans, asks that question as they watch U.S. culture go down like a thrashing mastodon giving itself up to some Pleistocene tar pit.

One explanation might be the effect of 40 years of deep fried industrial chicken pulp, and 44 ounce Big Gulp soft drinks. Another might be pop culture, which is not culture at all of course, but marketing. Or we could blame it on digital autism: Ever watch commuter monkeys on the subway poking at digital devices, stroking the touch screen for hours on end? That wrinkled Neolithic brows above the squinting red eyes?

But a more reasonable explanation is that, (A) we don't even know we are doing it, and (B) we cling to institutions dedicated to making sure we never find out.

As William Edwards Deming famously demonstrated, no system can understand itself, and why it does what it does, including the American social system. Not knowing shit about why your society does what it makes for a pretty nasty case of existential unease. So we create institutions whose function is to pretend to know, which makes everyone feel better. Unfortunately, it also makes the savviest among us -- those elites who run the institutions -- very rich, or safe from the vicissitudes that buffet the rest of us.

Directly or indirectly, they understand that the real function of American social institutions is to justify, rationalize and hide the true purpose of cultural behavior from the lumpenproletariat, and to shape that behavior to the benefit of the institution's members. "Hey, they're a lump. Whaddya expect us to do?"

Doubting readers may consider America's health institutions, the insurance corporations, hospital chains, physicians' lobbies. Between them they have established a perfectly legal right to clip you and me for thousands of dollars at their own discretion. That we so rabidly defend their right to gouge us, given all the information available in the digital age, mystifies the world.

Two hundred years ago no one would have thought sheer volume of available facts in the digital information age would produce informed Americans. Founders of the republic, steeped in the Enlightenment as they were, and believers in an informed citizenry being vital to freedom and democracy, would be delirious with joy at the prospect. Imagine Jefferson and Franklin high on Google.

The fatal assumption was that Americans would choose to think and learn, instead of cherry picking the blogs and TV channels to reinforce their particular branded choice cultural ignorance, consumer, scientific or political, but especially political. Tom and Ben could never have guessed we would chase prepackaged spectacle, junk science, and titillating rumor such as death panels, Obama as a socialist Muslim and Biblical proof that Adam and Eve rode dinosaurs around Eden. In a nation that equates democracy with everyman's right to an opinion, no matter how ridiculous, this was probably inevitable. After all, dumb people choose dumb stuff. That's why they are called dumb.

But throw in sixty years of television's mind puddling effects, and you end up with 24 million Americans watching Bristol Palin thrashing around on Dancing with the Stars, then watch her being interviewed with all seriousness on the networks as major news. The inescapable conclusion of half of heartland America is that her mama must certainly be presidential material, even if Bristol cannot dance. It ain't a pretty picture out there in Chattanooga and Keokuk.

The other half, the liberal half, concludes that Bristol's bad dancing is part of her spawn-of-the-Devil mama's plan to take over the country, and make millions in the process, not to mention make Tina Fey and Jon Stewart richer than they already are. That's a tall order for a squirrel brained woman who recently asked a black president to "refutiate" the NAACP (though I kinda like refutiate, myself). Cultural stupidity accounts for virtually every aspect of Sarah Palin, both as a person and a political icon. Which, come to think of it, may be a pretty good reason not to "misunderstimate" her. After all, we're still talking about her in both political camps. And the woman OWNS the Huffington Post, fer Christsake. Not to mention a franchise on cultural ignorance.

Cultural stupidity might not be so bad, were it not self-reproducing and viral, and prone to place stupid people in charge. All of us have, at some point, looked at a boss and asked ourselves how such a numb-nuts could end up in charge of the joint.

In my own field, the book biz, the top hucksters in sales and marketing, car salesman with degrees, are put in charge of publishing the national literature. Similarly, ex-Pentagon generals segue from killing brown babies in Iraq into university presidents and CEOs. Conversely, business leaders such as Donald Rumsfeld who fancy themselves as battlefield commanders and imagine their employees as troops to be "deployed," find themselves happily farting behind Pentagon desks. On the strength of having mistaken Sun Tzu's The Art of War as a business text, they get selected by equally delusional national leaders to make actual war on behalf of the rest of us.

But the most widespread damage is done at more mundane operational levels of the American empire, by clones of the over promoted asshole in the corner office where you work. At least one study demonstrated that random selection for corporate promotions offset the effect significantly. Research again confirms what is common knowledge around every workplace water cooler in the country.

Save my spot in the gulag, I'm off to Wal-Mart

Cultural ignorance of one sort or another is sustained and nurtured in all societies to some degree, because the majority gains material benefit from maintaining it. Americans, for example, reap huge on-the-ground benefits from cultural ignorance -- especially the middle class Babbitry -- from cultural ignorance generated by American hyper-capitalism in the form of junk affluence.

Purposeful ignorance allows us to enjoy cheaper commodities produced through slave labor, both foreign, and increasingly, domestic, and yet "thank god for his bounty" in the nation's churches without a trace of guilt or irony. It allows strong arm theft of weaker nations' resources and goods, to say nothing of the destructiveness of late stage capitalism -- using up exhausting every planetary resource that sustains human life.

The American defense, on those rare occasions when one is offered, runs roughly, "Well you commie bastard, I ain't ever seen a sweatshop and I got no Asian kids chained in the basement. So I've got what the guvment calls plausible deniability. Go fuck yerself!"

Uh, don't look now, but the banksters own your ass, your country has become a work gulag/police state and the most of the world hates you.

Such a thriving American intellectual climate enables capitalist elites to withhold and ration vital resources like health care simply by auctioning it off to the richest. Americans fail to grasp this because the most important fact (that a helluva lot of folks can't afford to bid, and therefore get to die early) never gets equal play with capitalist political propaganda, to wit, that if we give free medical attention to low income cleft palate babies, a wave of Leninism will seize the nation. That is cultural ignorance. We breathe the stuff every day of our lives.

But when Americans too poor to buy health care nevertheless vote to retain the corporate auction process, that is cultural stupidity.

(Let us now pause to clutch our hair in our fists and scream AAAAAAGGGGGHHHHH!)

Like the old song says, "Them that don't know don't know they don't know." I venture to say that even if they did, they would not know why. Primary truths elude us because of the junk affluence and propaganda. We get buried under a deluge of commodities that suggest we are all rich, or at least richer than most of the world. A mountain range of cheap shoes, cars, iPods, ridiculous amounts of available foodstuffs, and the entire spectacle of engorgement defines, and is enforced as, "quality of life" under materialistic commodities capitalism. The goods we have in our clutches trump the philosophical, or even the most practical considerations. "I may die early eating unidentified beef byproducts soaked in waste chemicals, but I'll die owning a 65-inch HDTV and a new five speed automatic Dodge Durango with a 5.7 L Hemi V8 under the hood!"

Even the threat of toasting planetary life is not enough to shake Americans loose from this disconnect. As Professor Emeritus of Natural Resources and Ecology & Evolutionary Biology Guy R. McPherson points out, "79.6% of respondents to a Scientific American poll are unwilling to forgo even a single penny to forestall the risk of catastrophic climate change. Scientific American readers undoubtedly are better informed than the general populace. And yet they won't pay a thing to avoid extinction of our species. Kinda makes you warm and fuzzy all over, doesn't it?"

Let us pray the next generation is a tad sharper.

Taser the tots

The "American Lifestyle," increasingly suspect as it is these days, is heavily soldiered and policed in the name of keeping we self-defined lotus eaters safe and secure from a jealous outside world. Which according to cultural consensus is a world that is at this very moment is stuffing its under drawers with explosives and buying plane tickets to Moline. Cultural ignorance dictates that the best way to stop foreign terrorists flying into the country is by humiliating American citizens flying out of the country. Go ahead, grope me, X-ray my dick and for god sake don't let anyone bring a large bottle of shampoo on board. In an obedient, authority worshipping police state, physical insult and surveillance are proof of safety.

It's profitable too, and not just for scanner manufacturers. The brouhaha over body scanners and crotch groping provide media with titillating fuel for ratings, thereby driving up TV advertising rates, which is passed on in the price of products we buy. So we pay to be insulted, have the hell scared out of us, and to unknowingly have our behavior shaped. Under American style capitalism, this mobius strip of cultural ignorance is called a win-win situation for everybody.

This also conveniently distracts us from the everyday human insult we practice on one another, as a result of state manufactured cultural misinformation -- fear. Ten years of orange alerts and post 9/11 fear mongering have led us to draw some paradoxical cultural conclusions.

Let us briefly careen off into one of these paradoxes. For instance, that we can taser our way to domestic security and tranquility. Yes, it's ugly business, but tasing the citizenry must be done. And besides, in these days of high unemployment, it's a paycheck for somebody -- usually, the guy who sat behind us in grade school happily eating chalk.

With taser packing police officers in thousands of schools, even grade schools (a weird enough cultural statement to begin with -- needless to say, the resulting deaths and injuries of school kids have personal injury lawyers shouting eureka and contemplating new recreational sail craft moored at Martha's Vineyard. Such are the rewards of righteous works through cult-ig.

In any case, the chance at a juicy lawsuit is accepted as a satisfactory offset to any screaming and writing in our school hallways. What are 50,000 volts and a little nerve damage, compared to a shot at paying off the credit cards, upgrading the family ride, and maybe remodeling the kitchen too?

But we gotta stick to the subject of cultural ignorance here, mainly because I wrote the title first and am determined to maintain some illusion of a theme here, or at least bullshit the reader into thinking that I have.

Soooo . . .

It can be safely said that cultural ignorance consists of the rational, sensible questions that never get asked. But it also includes the weird ones that are. For instance, one of the questions asked regarding tasering school kids is: What is the allowable weight range of a child to be tased? (Taser manufacturers say 60 pounds.) Somehow, by this geezer's prehistoric reasoning, that sounds like the wrong question, not to mention one that by its nature leads us away from the cultural truth.

The truth is that we live in a society which sanctions semi-electrocution of its own children on the grounds that it is not fatal, and therefore not true electrocution. It springs from the same streak of cultural cruelty that deems semi-drowning by water boarding not to be torture because it is seldom fatal.

This is not to be uncharitable to American communities willing to pony up tax money for school tasers. They've amply demonstrated their affectionate commitment to their children by bringing creationism and pizza-for-breakfast into the schools. But there remains the question, "What kind of community comes up with the idea of tasering its own children?"

The information racketeers

It is the job of our combined institutions to manage cultural information so as to deny the harmful aspects of the rackets they protect through legislation and promote through institutional research. That's why research shows that cell phone microwaves cause long term memory loss in rats, but do not harm people. Evidently, we are of different, more bullet proof mammalian material.

Our hyper capitalist system, through command of our research, media and political institutions, expands upon and disseminates only that information which generates money and transactions. It avoids, neglects or spins the hell out of information that does not. And if none of those work, the info is exiled to some corner of cyberspace such as Daily Kos, where it cannot change the status quo, yet can be ballyhooed as proof of our national freedom of expression. Here come the rotten eggs from the Internet liberals.

Cyberspace by nature feels very big from the inside, and its affinity groups, seeing themselves in aggregate and in mutual self reference, imagine their role bigger and more effective than it is. From within the highly directed, technologically administrated, marketed-to and propagandized rat cage called America, this is all but impossible to comprehend. Especially when corporate owned media tells us it is.

Take the world recent shaking WikiLeak's "revelations" of Washington's petty misery and drivel, which are scarcely revelations, just more extensive details about what we all already knew. Come on now, is it a revelation that Karzai and his entire government is a nest of fraudulent double-crossing thieves? Or that the US is duplicitous? Or that Angela Merkel is dull? The main revelation in the WikiLeaks affair was the U.S. government's response -- which was to bring US freedom of speech policy firmly in line with China's. Millions of us in cyber ghettoes saw it coming, but our alarm warnings were shouted inside a cyberspace vacuum bell jar.

Bear in mind that I am writing this from outside the US borders and media environment, where people watch the WikiLeaks story unfold more in amusement than anything else.

The WikiLeaks affair is surely seismic to those whose asses ride on the elite diplomatic intrigues. But in the big picture it will not change the way the top lizards in global politics, money and war have done business since the feudal age -- which is to say with arrogant disregard for the rest of us. Theirs is an ancient system of human dominance that only shifts names and methodologies over the centuries. Two years from now, little will have changed in the old, old story of the powerful few over the powerless many. In this overarching drama, Obama, Hillary and Julian Assange are passing players. Watching the sweaty, fetid machinations of our overlords with such passionate involvement only keeps us from seeing the big picture -- that they are the players and we are the pawns.

Still, I for one am in favor of giving Assange the Médaille militaire, the Noble Prize, 15 virgins in paradise and a billion in cash as a reward for his courage in doing damned well the only significant thing that can be done at this time -- momentarily fucking up government control of information. But "potentially stimulating a new age of U.S. government transparency," (BBC) it ain't."

Which brings us to back to the question of cultural ignorance. For ten points, why was Julian Assange forced to do what the world press was supposed to be doing in the first place?

Bulletin: PayPal has caved to government pressure to pull WikiLeak's PayPal account for contributions. However, the feds generously let PayPal keep its porn and prostitution clients.

The transparency scam

It is a form of cultural ignorance to believe that at some point or other, we were more in charge and that our government was somehow more transparent in the past. Societies declining into obsolescence understandably resist looking forward, and hang onto their past mythologies. Consequently, both liberals and conservatives in America feed on myths of political action which died in Vietnam. The results are ludicrous. Tea Partiers attempt to emulate the 1960s protest gatherings by staging rallies sponsored by the richest beneficiaries of the status quo. For the average TP participant, the goal, near as I can tell, is to "start a new American Revolution," by wearing foodstuffs, screaming, threatening, and voting for nitwits. Media pundits proclaim the Tea Party "a historic populist movement."

Neither populist, nor authentic movement, the Tea Party may yet prove historic, however, by seriously fucking things up more than they already are. Spun entirely from manufactured spectacle (and thus void of cohesive political philosophy or internal logic), the Tea Party lurches across the political landscape bellowing at the cameras and collecting the victims of cultural ignorance in sort of a medieval idiots crusade. But to the American public, seeing the Tea Party on television is proof enough of relevancy and significance. After all, stuff doesn't get on TV unless it's important.

Progressives also fancy a revolution, one in which they participate through the Internet petitions, and media events such as the risk free Jon Stewart Rally to Restore Sanity, where no one risked even missing an episode of Tremaine. Seeing people like themselves on television was proof fighting the good fight. The Stewart rally was nonetheless culturally historic; we will never see a larger public display of post modern irony congratulating itself.

In the historical view, cultural ignorance is more than the absence of knowledge. It is also the result of long term cultural and political struggle. Since the industrial revolution, the struggle has been between capital and workers. Capital won in America and spread its successful tactics worldwide. Now we watch global capitalism wreck the world and attempt to stay ahead of that wreckage clutching its profits. A subservient world kneels before it, praying that planet destroying jobs will fall their way. Will unrestrained global capitalism, with all the power and momentum on its side and motivated purely by machinelike harvesting of profits, reduce the faceless masses in its path to slavery? Does a duck shit in a pond?

Meanwhile, here we are, American riders on the short bus, barreling into the Grand Canyon. With typical American gunpoint optimism, we've convinced ourselves we're in an airplane. A few smarter kids in the back whisper about hijacking and turning the bus around. But the security cop riding shotgun just strokes his taser and smiles. Not that yours truly has the ass to take on the security surveillance state. Hell no. I jumped out the window when the bus shot past Mexico.

What America needs is some balls

GOP honcho Mitch O'Connell says what America needs is for Republicans to finish beating the snot out of Obama, and strengthen the already rich by eliminating taxes for them and shifting the burden onto us. Obama says America needs to find bipartisan cooperation with the party of ruthlessness. Elton John says that America needs more compassion (Thanks, we never noticed).

What America really needs is a wall-to-wall people's insurrection, preferably based on force and fear of force, the only thing oligarchs understand. And even then the odds are not good. The oligarchs have all the legal power, police, jails and prisons, surveillance and firepower. Not to mention a docile populace.

Shy of open insurrection, a nationwide refusal to pay income taxes would certainly shake things up. But broader America is happy in the sense they know happiness as an undisturbed regimen of toil, stress and commodity consumption. Despite the way it looks in the news, most Americans remain untouched by foreclosure, bankruptcy and unemployment. So risking loss of their work-buy-sleep cycle in an insurrection looks to be sheer lunacy to them. Like cows, they are kept comfortable in the pure animal sense to be milked for profit. Animal comfort kills all thoughts of revolution. Hell, half of mankind would be thrilled with the average American's present material situation.

And besides, revolutionary history does not exist for Americans. The 20th Century's successful revolutions in Russia, Germany, Mexico, China, and Cuba are wired into our minds as history's evil failures, because all but one were Marxist. (The only successful non-Marxist revolution of the 20th Century was Fidel Castro's Cuban Revolution).

So if we are talking change through revolt, we're necessarily talking about deconditioning because the thing we fear already has a life deep in our own consciousness. Deconditioning from cultural ignorance is at the heart of any insurrectionary politics.

Deconditioning also involves risk and suffering. But it is transformative, freeing the self from helplessness and fear. It unleashes the fifth freedom, the right to an autonomous consciousness. That makes deconditioning about as individual and personal act as is possible. Maybe the only genuine individual act.

Once unencumbered by self-induced and manufactured cultural ignorance, it becomes clear that politics worldwide is entirely about money, power and national mythology, with or without some degree of human rights. America still has all of the above to one degree or another. Yet for all practical purposes, such as advancing the freedom and the well being of its own people, the American republic has collapsed.

Of course, there is still money to be made by the already rich. So the million or so people who own the country and the government use their control to convince us that there is no collapse, just economic and political problems that need to be solved. Naturally, they are willing to do that for us. Consequently, the economy is discussed in political terms, because the government is the only body with the power to legislate, and therefore render the will of the owning class into law.

But politics and money are never going to fill what is essentially a public vacuum that is moral, philosophical and spiritual. (The latter was instantly recognized by fundamentalist Christians, disfigured by cultural ignorance, as they may be.) Not many ordinary Americans talk about this vacuum. The required spiritual and philosophical language has been successfully purged by newspeak, popular culture, a human regimentation process masquerading as a national educational system, and the ruthlessness of everyday competition, which leaves no time to contemplate anything.

Still, the void, the meaninglessness of ordinary work and the emptiness of daily life scares thinking citizens shitless, with its many unspeakables, spy cams, security state pronouncements, citizens being economically disappeared, and general back-of-the-mind unease. Capitalism's faceless machinery has colonized our very souls. If the political was not personal to begin with, it's personal now.

Some Americans believe we can collectively triumph over the monolith we presently fear and worship. Others believe the best we can do is to find the personal strength to endure and go forward on lonely inner plains of the self.

Doing either will take inner moral, spiritual and intellectual liberation. It all depends on where you choose to fight your battle. Or if you even choose to fight it. But one thing is certain. The only way out is in.

GATA today brought suit against the U.S. Federal Reserve Board, seeking a court order for disclosure of the central bank's records of its surreptitious market intervention to suppress the monetary metal's price.

The suit was filed in U.S. District Court for the District of Columbia and targets Fed records involving gold swaps, exchanges of gold with foreign financial institutions. In a letter dated September 17 this year to GATA's law firm, William J. Olson P.C. of Vienna, Virginia, (http://www.lawandfreedom.com) Fed Board of Governors member Kevin M. Warsh acknowledged that the Fed has gold swap agreements with foreign banks but insisted that such documents remain secret:

The lawsuit follows two years of GATA's efforts to obtain from the Federal Reserve and the U.S. Treasury Department a candid accounting of the U.S. government's involvement in the gold market. These efforts parallel those of U.S. Rep. Ron Paul, R-Texas, who long has been proposing legislation to audit the Fed. The Fed has wrapped in secrecy much of its massive intervention in the markets over the last year, and Paul's legislation recently was approved by the U.S. House of Representatives.

The Fed claims that its gold swap records involve "trade secrets" exempt from disclosure under the U.S. Freedom of Information Act.

While GATA has produced many U.S. government records showing both open and surreptitious intervention in the gold market in recent decades (see http://www.gata.org/node/8052), Fed Governor Warsh's letter is confirmation that the government is surreptitiously operating in the gold market in the present as well. That intervention constitutes a huge deception of financial markets as well as expropriation of precious metals miners and investors particularly. This deception and expropriation are what GATA was established in 1999 to expose and oppose.

Of course GATA's lawsuit against the Fed will take months if not years to resolve. We think we have a good chance of winning it in court. But we can win it outside court, and much sooner, if the suit can gain enough publicity from the financial news media and market analysts and prompt enough inquiry from them and from the public, the mining industry, and members of Congress.

So GATA urges its friends to publicize the suit and to urge journalists, market analysts, mining companies, and members of Congress to join us in seeking disclosure of the Fed's gold market intervention records. If enough clamor is directed at the Fed about these records, the gold price suppression scheme will lose its surreptitiousness and fail.

Unfortunately the World Gold Council, which each year collects tens of millions of dollars in membership fees from mining companies in the name of representing them and gold investors, refuses to question governments about their surreptitious interventions in the gold market. These interventions powerfully influence not only gold's price but the prices of government bonds and currencies, as well as interest rates generally and the value of all capital and labor in the world. There is no more important issue in the world economy than gold price suppression.

So what should have been the World Gold Council's work has fallen to GATA, a non-profit educational and civil rights organization that operates from month to month on donations from people who share its objective -- free and transparent markets in the precious metals and fair dealing among nations generally. As we prosecute our lawsuit against the Fed, we'll be grateful for your support. We promise to do something with it.